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Issues Involved:
1. Whether the petitioners have established their case for winding up the respondent company under Sections 433(e), 434(1)(a), and 439(1)(b) of the Companies Act, 1956. 2. Whether the petitioners have substantiated their claim of debt owed by the respondent company. 3. Whether the statutory notice requirements under Section 434(1)(a) of the Companies Act have been met. 4. Whether the respondent company is commercially insolvent and unable to pay its debts. Issue-wise Detailed Analysis: 1. Establishing the Case for Winding Up: The petitioners filed the petition under Sections 433(e), 434(1)(a), and 439(1)(b) of the Companies Act, 1956, seeking to wind up the respondent company and appoint an official liquidator. The court noted that the petitioners resorted to the machinery for winding up the company with a lack of bona fides and oblique motives. The first petitioner, who was the managing director until June 1988, claimed to have advanced Rs. 5,25,000 to the company. However, there was no evidence to substantiate this claim. The court found that the amounts were given to acquire shares of Mr. L.K.A. Jayaraman, not for the company's business. 2. Substantiating the Claim of Debt: The petitioners claimed to have advanced Rs. 5,11,763 on various dates, which was credited in the company's books. However, the court found that the petitioners failed to produce the account books, which were crucial to substantiate their claims. The petitioners produced balance sheets (Exhibits P1 to P5) and a letter (Exhibit P6), but these were not approved by the board of directors as required under Section 215 of the Companies Act. The court noted that PW-1 admitted in cross-examination that he withheld the account books and did not account for the turnover of the company. RW-1 testified that no amount was due to the petitioners as on the date of filing the petition. The court concluded that the petitioners failed to prove the debt, which is a condition precedent for maintaining the company petition for winding up. 3. Statutory Notice Requirements: The petitioners claimed to have issued a statutory notice under Section 434(1)(a) of the Companies Act on March 2, 1989, but it was returned. The court found that the petitioners did not substantiate this claim. Exhibits R-21 and R-22 indicated that postal articles addressed to the company were not delivered. The petitioners did not produce the returned statutory notice. The court rejected the petitioners' attempt to sustain their case under Section 434(1)(c) of the Companies Act, noting that the petition specifically referred to Section 434(1)(a) and not Section 434(1)(c). 4. Commercial Insolvency: The court found no evidence to show that the company was commercially insolvent. The company produced exhibits (R-31 to R-34) showing net profits and substantial payments towards excise duties (Exhibit R-15). The company also invested in machinery and additional buildings (Exhibits R-28 and R-29 series). RW-1 testified that the company's turnover would cross Rs. 1 crore, resulting in more profit. The total creditors were about Rs. 4.50 lakhs, and no creditor demanded payment from the company. The court concluded that the company was doing well and moving towards progress and growth. Conclusion: The court dismissed the petition for winding up the respondent company, finding that the petitioners failed to prove the debt and that the company was not commercially insolvent. The court emphasized that a winding-up petition is not a legitimate means of enforcing payment of a debt bona fide disputed by the company. The court referred to precedents, including the Supreme Court's ruling in Amalgamated Commercial Traders (P.) Ltd. v. A. C. K. Krishnaswami, which established that an order of winding up will not be made where a debt is bona fide disputed and the company's defense is substantial. The court also noted that it is not in the interest of justice or public interest to wind up the respondent company. The petition was dismissed with no costs.
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